Trans Mountain Pipeline Expansion Project Approved

June 21, 2019

Written By Ashley M. White, Sean Assié, Geoffrey P. Stenger, Jason D. Roth and Thomas W. McInerney

On June 18, 2019, the Prime Minister announced that the Trans Mountain Pipeline Expansion Project (the "Project"), which involves the twinning of the existing Edmonton (Strathcona)-Burnaby pipeline and the expansion of a marine terminal, was approved, for the second time, by the Federal cabinet.

Background

The Project is one of the largest, most complex and politically-charged projects to be constructed in Canada in the last few decades. Due to increasing political uncertainty in British Columbia, in April 2018, Kinder Morgan (the then-owner of the Project) announced that it was suspending all non-essential work on the Project. The Federal government subsequently purchased the pipeline from Kinder Morgan with a commitment to fund and de-risk the Project, and ultimately sell it back to the private sector.

In August 2018, the Federal Court of Appeal quashed the Certificate of Public Convenience and Necessity (CPCN) granted by the National Energy Board (the "NEB") to Kinder Morgan for the Project. The ruling found that the NEB had erred in its decision to exclude considerations of the environmental impact of project-related marine shipping, and that the Federal government had failed to meet its legal duty to consult with Indigenous peoples. The Court remitted the issue of the Project approval to the Governor in Council for redetermination.

On February 22, 2019, the NEB released its marine reconsideration report, subject to 156 conditions that were ultimately outlined if the Project was subsequently approved by the Federal government, as well as 16 recommendations to federal agencies related to marine shipping that fell outside of the NEB's mandate. The NEB's decision set a three-month deadline for the Federal government to complete its Indigenous consultation requirements and release a final decision on the Project, which was delayed until June 18, 2019.

On June 18, 2019, the Governor in Council once again directed the NEB to issue a Certificate of Public Convenience and Necessity to Trans Mountain ("TM"), the crown corporation holding the Project, subject to the NEB's terms and conditions, including amendments to six of the 156 NEB conditions to further address concerns of Indigenous groups impacted by the Project. 

Approved Again

Consistent with reports that the Federal government had been following the roadmap set forth in the Federal Court of Appeal's decision from August 2018, the Prime Minister announced that it acted on the Court's decision and reexamined the impact the Project would have on the marine environment and engaged in a "Phase 3" consultation process with Indigenous peoples led by former Supreme Court Justice, Frank Iacobucci. Below are the key takeaways from the Federal government's decision to proceed with the Project:

1. The Federal government has committed, through the Paris Agreement and subsequent implementation of the Pan-Canadian Framework on Clean Growth and Climate Change, to reduce emissions and support clean economic growth opportunities. In his announcement to proceed with the Project, the Prime Minister acknowledged that protecting the environment and addressing climate change can be reconciled with the expanded sale of Canada's oil outside of North America, of which the Project will play a critical role. Emissions from the Project have been accounted for in Canada's national emissions projections and in Alberta's 100 million tonnes legislated cap on annual oil sands emissions – which was a significant factor in the Federal cabinet's decision to approve the Project (See Greenhouse gas emissions from the Trans Mountain project).
2. In order to fund Canada's transition to a "low-carbon economy", the Federal government has committed to spending all new corporate tax revenues and all other revenues it earns from owning the Trans Mountain pipeline system once in-service, along with any net proceeds from the intended sale of the Trans Mountain pipeline system, to such low-carbon transition initiatives.
3. The Federal government will undertake a further consultation process with Indigenous communities impacted by the Project to determine how they may participate in the Project either through equity investment or revenue sharing.

Potential Challenges

Although the Federal government's approval can be viewed as a positive step for the continued development and investment in the Canadian oil industry, the completion of the Project will potentially be met with further challenges.

Indigenous communities in British Columbia, most notably the Tsleil-Waututh Nation, have already indicated potential legal challenges of the Federal government's decision to approve the Project on the basis that the government failed, once again, to adequately discharge its duty to consult.

In addition, the British Columbia government has indicated that it will continue to pursue an appeal to the Supreme Court of Canada of the British Columbia Court of Appeal’s unanimous decision that British Columbia does not have the jurisdictional authority to restrict shipments of heavy oil through the province.  Notably, the Supreme Court of Canada is required to hear the appeal as it was sent to the British Columbia Court of Appeal as a reference case.

What's Next?

On June 21, 2019, the NEB issued the amended Certificate of Public Convenience and Necessity for the Project. The NEB has also issued, for public comment, a proposed approach to resume the regulatory process (See NEB seeking Public Comment on Approach to Resume Regulatory Processes for the Trans Mountain Expansion Project). It will continue to be responsible for overseeing TM's compliance with the 156 conditions imposed by the NEB in its report.

In addition, TM is required to apply again for all of the necessary federal, provincial and local government permits. Additional route hearings will likely also be required for certain segments of the Project to allow TM to obtain approval of those portions of its preferred route.

The Federal government has indicated it will explore opportunities for direct Indigenous participation in the Project based on several proposals received during the Phase 3 consultation process.

Timelines for all of these activities have not yet been established; however, construction is still anticipated to recommence in 2019.

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